The following discussion is qualified in its entirety by, and should be read in conjunction with, our consolidated financial statements, including the notes thereto included elsewhere in this Quarterly Report on Form 10-Q/A and our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2008, as previously filed with the Securities and Exchange Commission. Amounts are presented in thousands except for share and per share data.

Special notice regarding forward-looking statements

This quarterly report on Form 10-Q/A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to future events or our future financial performance. Readers are cautioned that any statement that is not a statement of historical fact including, but not limited to, statements which may be identified by words including, but not limited to, "anticipate," "appear," "believe," "could," "estimate," "expect," "hope," "indicate," "intend," "likely," "may," "might," "plan," "potential," "seek," "should," "will," "would," and other variations or negative expressions thereof, are predictions or estimations and are subject to known and unknown risks and uncertainties. Numerous factors, including factors that we have little or no control over, may affect INX's actual results and may cause actual results to differ materially from those expressed in the forward-looking statements contained herein. In evaluating such statements, readers should consider the various factors identified in our Annual Report on Form 10-K/A for our fiscal year ended December 31, 2008, as filed with the Securities and Exchange Commission including the matters set forth in Item 1A. - "Risk Factors," which could cause actual events, performance or results to differ materially from those indicated by such statements.

Restatement

On August 12, 2009, management of the Company in consultation with the Audit Committee of the Board of Directors, determined that the our financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009 required restatement. This determination was made following a review of the following:

· During the performance of a routine internal audit, a computational error was discovered in the calculation of services revenue and related commission expense affecting the fiscal quarter ended March 31, 2009. We determined that correction of the error will result in an increase in its previously reported net loss of approximately $186 ($0.02 per share). The correction has no effect on the previously reported Statement of Cash Flows.

· We previously presented our floor plan financing balances as trade accounts payable because we believed that our principal vendor had a substantial investment in the floor plan financing company. During the preparation of our Quarterly Report on Form 10-Q for the period June 30, 2009, we became aware that the principal vendor had no ownership interest in its floor plan financing company. Consequently, we are correcting our presentation of the floor plan balances in our Balance Sheets from trade accounts payable to floor plan financing and the related amounts in our Statements of Cash Flows from operating activities to financing activities. The error affects our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009. The correction of the error has no effect on the previously reported statements of operations. There is no impact to our current liabilities or total liabilities as a result of this reclassification as of December 31, 2008 or as of March 31, 2009 and 2008.

· In addition to the aforementioned corrections, we are recording certain immaterial adjustments that decrease pre-tax expense by $13 for the three-month period ended March 31, 2009.

The effect of the aforementioned corrections on the condensed consolidated financial statements as of March 31, 2009 and December 31, 2008 and for the three months ended March 31, 2009 and 2008 are more fully described in Note 10 of the Notes to Condensed Consolidated Financial Statements. The "Results of Operations" and "Liquidity and Capital Resources" sections of this Item 2 has been restated to reflect the impact of the aforementioned errors.

Results Of Operations

Period Comparisons. The following tables set forth, for the periods indicated,
certain financial data derived from our condensed consolidated statements of
operations. Percentages shown in the table below are percentages of total
revenue, except for the products and services components of gross profit, which
are percentages of the respective product and service revenue.

Three Months Ended March 31, 2009 Compared To the Three Months Ended March 31,
2008

                                                         Three Months Ended March 31,
                                                       2009                           2008
                                              Amount              %           Amount           %
                                              (As Restated, Note 10)
Revenue:
Products                                   $     44,566             77.7     $  50,491          84.7
Services                                         12,767             22.3         9,152          15.3
Total revenue                                    57,333            100.0        59,643         100.0
Gross profit:
Products                                          8,444             18.9         9,207          18.2
Services                                          3,859             30.2         2,940          32.1
Total gross profit                               12,303             21.5        12,147          20.4
Selling, general and administrative
expenses                                         12,728             22.2        10,384          17.4
Operating (loss) income                            (425 )           (0.7 )       1,763           3.0
Interest and other income (expense), net             12                -           (73 )        (0.2 )
Income tax expense                                   50              0.1           683           1.1
Net (loss) income from continuing
operations                                         (463 )           (0.8 )       1,007           1.7
(Loss ) income from discontinued
operations, net of income taxes                     (39 )           (0.1 )           4             -
Net (loss) income                          $       (502 )           (0.9 )   $   1,011           1.7

Revenue. Total revenue decreased by $2,310, or 3.9%, to $57,333 from $59,643. Products revenue decreased $5,925, or 11.7% to $44,566 from $50,491. The decrease in products revenue was primarily due to our markets becoming increasingly affected by the continuing macroeconomic downturn in the United States. We experienced lower revenue in the Northwest Region, National Division, Southwest Region, and Gulf Coast Region, partially offset by revenue from newly acquired locations in the New England Region and Northern California Region and increased products revenue from large projects in the Southern California and North Texas Regions. Services revenue increased $3,615 or 39.5% to $12,767 from $9,152. Services revenue increased in the majority of our Regions, led by increases in the Federal Division, Central Texas Region, Southwest Region, and Southern California Region, and the newly acquired locations in the New England Region and Northern California Region.

Gross Profit. Total gross profit increased by $156, or 1.3%, to $12,303 from $12,147. Gross profit as a percentage of revenue increased to 21.5% from 20.4%, due to higher products revenue margins and substantially higher 2009 services revenues as a percent of total revenues. Gross profit on the products sales component decreased $763 or 8.3%, to $8,444 from $9,207 and, as a percentage of sales, increased to 18.9% from 18.2%. Gross profit on services revenue increased $919 or 31.3% to $3,859 from $2,940 and gross profit as a percent of services revenue decreased to 30.2% from 32.1%. The services gross margin in both periods was within our target range of 30 to 35%.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $2,344, or 22.6% to $12,728 from $10,384. As a percentage of total revenue, these expenses increased to 22.2% in 2009 versus 17.4% in 2008. Increased 2009 expenses reflect selling, general and administrative expenses of the operations acquired in the NetTeks, AccessFlow, and VocalMash acquisitions, additional sales and administrative personnel costs from headcount increases, and substantially higher audit and tax costs.

Operating (Loss) Income. Operating income decreased $2,188 to a loss of $425 from income of $1,763, primarily due to lower sales and proportionately higher selling, general and administrative expenses partially offset by higher gross margins.

Interest and Other Income (Expense), Net. Interest and other income (expense), net, changed by $85 to income of $12 from expense of $73, primarily due to the elimination of borrowings under our senior credit facility in June 2008.

Income Tax Expense. Income tax expense decreased by $633 to $50 from $683, primarily due to lower 2009 pretax income. An income tax benefit was not recognized for the 2009 loss due to the corresponding valuation allowance recorded as discussed further under "Deferred Tax Assets" below.

Net (Loss) Income. Net income decreased $1,513 to a loss of $502 from income of $1,011, primarily due to lower sales and proportionately higher selling, general and administrative expenses partially offset by higher gross margins and lower income tax expense.

Tax Loss Carryforward. Because of our operating losses in 2003, 2005, 2006 and 2008, and exercises of stock options, we have accumulated a net operating loss carryforward for federal income tax purposes that, at March 31, 2009, was approximately $2,540. Since United States tax laws limit the time during which an NOL may be applied against future taxable income and tax liabilities, we may not be able to take full advantage of our NOL carryforward for federal income tax purposes. The carryforward will expire during the period 2023 through 2026 if not otherwise used. A change in ownership, as defined by federal income tax regulations, could significantly limit the company's ability to utilize its carryforward.

As a result of the adoption of SFAS 123(R), we recognize tax benefits associated with the exercise of stock options directly to stockholders' equity only when realized. Accordingly, deferred tax assets are not recognized for net operating loss carryforwards resulting from windfall tax benefits. A windfall tax benefit occurs when the actual tax benefit realized upon an employee's disposition of a share-based award exceeds the cumulative book compensation charge associated with the award. At March 31, 2009, windfall tax benefits included in NOL carryforward but not reflected in deferred tax assets are $2,540.

Deferred Tax Assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences, as determined pursuant to SFAS No. 109, "Accounting for Income Taxes," become deductible. Management considers the reversal of deferred tax liabilities, projected future income, and tax planning strategies in making this assessment. Management's evaluation of the realizability of deferred tax assets must consider both positive and negative evidence. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. During the fourth quarter of 2008 and in the first quarter of 2009, we recorded a valuation allowance related to the net operating loss carryforwards and other temporary items as we determined it is more likely than not that we will not be able to use the assets to reduce future tax liabilities.

Liquidity and Capital Resources

Sources of Liquidity

Our principal sources of liquidity are collections from our accounts receivable and our credit facility with Castle Pines Capital LLC (the "Credit Facility"), which we believe are sufficient to meet our short-term and long-term liquidity requirements. We use the Credit Facility to finance the majority of our purchases of inventory and to provide working capital when our cash flow from operations is insufficient. Our working capital increased to $14,949 at March 31, 2009 from $14,173 at December 31, 2008, primarily due to improved collections of accounts receivable and lower products revenues as a percent of total revenues.

The total Credit Facility is $60,000 with an additional $10 million credit facility specifically for acquisitions ("Acquisition Facility"). Substantially all of our assets are pledged as collateral under the Credit Facility. Advances under the Acquisition Facility are specific to each acquisition and subject to approval by CPC based on pre-established criteria. There were no borrowings under the Acquisition Facility outstanding at March 31, 2009.

As of March 31, 2009, borrowing capacity and availability were as follows:

                  Total Credit Facility                $  60,000
                  Borrowing base limitation              (22,960 )
                  Total borrowing capacity                37,040
                  Less interest-bearing borrowings             -
                  Less non-interest bearing advances     (31,512 )
                  Total unused availability            $   5,528

In addition to unused borrowing availability, liquidity at March 31, 2009 included our cash balance of $8,681. The "unused availability" is the amount not borrowed, but eligible to be borrowed. The borrowing base restrictions generally restrict our borrowings under the Credit Facility to 85% of the eligible receivables, 100% of our floorplanned inventory and 75% of Cisco vendor rebates receivable.

We use the Credit Facility to finance purchases of Cisco products from Cisco and from certain wholesale distributors. Cisco provides 60-day terms, and other wholesale distributors typically provide 30-day terms. Balances under the Credit Facility that are within those respective 60-day and 30-day periods (the "Free Finance Period") do not accrue interest and are classified as floor plan financing in our balance sheet. To the extent that we have credit availability under the Credit Facility, it gives us the ability to extend the payment terms past the Free Finance Period. Amounts extended past the Free Finance Period accrue interest and are classified as notes payable on our balance sheet, for which there was no balance outstanding at either March 31, 2009 or December 31, 2008. The interest rate of the Credit Facility is the prime rate plus 0.5% (3.75% at March 31, 2009) and the interest rate of the Acquisition Facility is the prime rate plus 2.0% (5.25% at March 31, 2009).

As defined in the Credit Facility there are restrictive covenants measured at each quarter and year-end regarding minimum tangible net worth, maximum debt to tangible net worth ratio, minimum working capital and a minimum current ratio. At March 31, 2009, we were in compliance with the loan covenants and we anticipate that we will be able to comply with the loan covenants during the next twelve months. If we violate any of the loan covenants, we would be required to seek waivers from CPC for those non-compliance events. If CPC refused to provide waivers, the amount due under the Credit Facility could be accelerated and we could be required to seek other sources of financing.

Cash Flows. During the three months ended March 31, 2009, our cash decreased by $2,256. Operating activities provided cash of $6,307, investing activities used $125, and financing activities used $8,438.

Operating Activities. Operating activities provided $6,307 in the three months ended March 31, 2009, as compared to providing cash of $1,700 in the comparable 2008 period. During the three months ended March 31, 2009, net income and noncash adjustments to net income provided cash of $874 and changes in asset and liability accounts provided cash of $5,433, primarily due to reduced accounts receivable resulting from lower sales.

Investing Activities. Investing activities used $125 in the three months ended March 31, 2009, compared to $617 used during the comparable period in 2008. Our investing activities primarily consisted of capital expenditures of $125 in 2009 and $563 in 2008. Capital expenditures in both years were primarily related to purchases of computer equipment and software, and to a lesser degree, leasehold improvements. During the next twelve months, we do not expect to incur significant capital expenditures requiring cash, except for acquisitions, of which we cannot predict the certainty or magnitude.

Financing Activities. Financing activities used $8,438 in the three months ended March 31, 2009, as compared to using $2,187 in the comparable period in 2008. Funds used in the three months ended March 31, 2009 were primarily from net payments under the floor plan financing ($8,490). The funds used in the comparable 2008 period were primarily from net payments under the floor plan financing ($1,779) and to purchase common stock under the common stock repurchase program discussed in Part II, Item 2 ($1,536), partially offset by cash generated from the exercise of stock options ($403) and excess tax benefits from stock option exercises ($601).